Inside The Netflix/Comcast Deal and What The Media Is Getting Very Wrong

On Sunday, Comcast and Netflix announced a commercial interconnect relationship between the two companies, which is in the very early stages of implementation, and as a result, many who clearly don’t understand how the Internet works are writing about the news. [Here’s How The Comcast & Netflix Deal Is Structured, With Data & Numbers] Those who don’t cover network infrastructure for a living should not be trying to explain the technical details behind today’s announcement. Articles from mainstream outlets like TechCrunch, WSJ, NPR, Time and many others aren’t even getting the basics right. Words like transit, peering, speed, bandwidth, capacity, etc. are being used interchangeably without any understanding of what they mean. [Updated 10:15pm: Time was originally mentioned due to a short piece they quickly put up when the news was announced. Since that post, they have done extensive, detailed coverage which is actually very good, so in fairness to them, I have removed them from the list.]

Naturally, many of these same people are also implying that because Netflix has to pay Comcast, consumers will foot the bill for this as Netflix will have to charge more for their service. This could not be further from the truth. Those stating this have no clue how Netflix delivers their content today or what costs they already incur. If they did, they would know this is not a new cost to Netflix, it’s simply paying a different provider, and it should be at a lower cost. It should actually be cheaper for Netflix to buy direct from Comcast, and they also get an SLA, which also improves quality and that’s a good thing. Given that Netflix has many options to buy transit from many different transit providers, why would they pay more? They wouldn’t.

Some are mad at this deal as they say this will start a trend where content owners will need to pay multiple ISPs to have good video quality, which isn’t true. The problem with that idea is that the vast majority of all content owners use third party content delivery networks (www.cdnlist.com) to get the content to ISPs and are NOT trying to build their own CDN like Netflix has. Only Netflix, Microsoft, Yahoo, Apple, Google and a handful of others have built or are building out their own CDNs. Every other content owner out there including MLB, CBS, FOX, Disney, Viacom, NFL, etc. all use third party CDNs. So this has no impact on any of them as they aren’t trying to place servers inside last mile networks and use companies like Akamai, Level 3, Limelight and EdgeCast for content delivery.

Even worse, some want to imply that today’s announcement has to do with Net Neutrality and Tech Crunch went as far to say that the deal “may be legally outside of the traditional net neutrality rules.” May be? Are they serious? Commercial interconnect relationships, also referred to as paid peering agreements, have been around since the Internet started, and it’s how the Internet works. Commercial interconnect deals have NOTHING TO DO WITH NET NEUTRALITY. Implying otherwise shows a complete lack of regard in understanding how traffic is and has been exchanged across networks for the past twenty years. The media as a whole should stop trying to insinuate or imply that everything that happens between two networks comes down to Net Neutrality. It doesn’t. [See: Netflix’s Streaming Quality Is Based On Business Decisions by Netflix & ISPs, Not Net Neutrality]

In the hopes of trying to educate the market, let’s clear up a lot of the confusion many in the media have created. The first one is that consumers need more “speed” from Comcast or Verizon to get better quality video streaming from Netflix. This is not the case. Netflix’s videos are encoded at a certain level of quality, which requires the consumer to have a specific level of throughput, to get that quality. It has nothing to do with “speed”. If you want to stream a 2Mbps video or a 4Mbps video from Netflix, you don’t need more “speed”, you need more throughput. Speed is the rate at which packets get from one location to another. Throughput is the average rate of successful message delivery over a communication channel. SPEED AND THROUGHPUT ARE NOT THE SAME THING. Next up are articles where it says that transit allows two networks to exchange “bandwidth”, which is not accurate. Transit allows providers to exchange traffic, but bandwidth and traffic are not the same things. Bandwidth is simply the data rate measured in bits per second. Traffic is data in a network encapsulated in network packets.

Another statement I have seen people write about is saying that the deal focuses on the “two company’s pipes”. Netflix is not a network operator, they don’t have any “pipes”, they buy capacity from other network providers who have the pipes. So while this deal is about the interconnection between Comcast and Netflix, Comcast is the only one who actually owns the pipes. Netflix is simply leasing capacity from other network providers. In addition, Netflix does not own an “Open Connect Network”. Open Connect is a program, it’s not a network that Netflix “owns” as the servers caching and delivering Netflix’s content are sitting inside the ISP networks, which isn’t owned or operated by Netflix. Open Connect is just another CDN. It is most similar to Akamai, except Open Connect doesn’t have SLAs with their customers.

Lately, many have been writing about transit with no real idea of just how many types of transit one can buy or how transit deals work. You can buy full transit, partial transit, select routes, on-net routes, etc. and ISPs will create a service and price around the customer request. Transit deals vary greatly, in size, type, price and host of other factors and are not a one-size-fits-all model. So when people write about “transit” without any definition, they are being too generic in its description. Many transit deals are alike, but transit relationships also vary greatly based on the region of the world you are buying transit in. CDNs like Netflix typically connect with many transit suppliers. This helps them route around problems and helps them avoid becoming a traffic problem by overloading any one path.

One thing not mentioned in all of these stories is all the different ways in which Netflix is currently streaming video. To date, a large percentage of Netflix’s traffic, by my guess 50% or more in the U.S., hasn’t been moved away from third-party CDNs and into the last mile. There are three different ways Netflix currently streams their videos. Via ISPs that are in their Open Connect Program, through third-party CDNs Level 3 and Limelight Networks and via Netflix’s own CDN where they lease network services and run their own servers. So most writing about Netflix don’t even know the basics of how their content is delivered today or how CDN and transit providers are involved.

Today’s news is very simple to understand. Netflix decided it made sense to pay Comcast for every port they use to connect to Comcast’s network, like many other content owners and network providers have done. This is how the Internet works, and it’s not about providing better access for one content owner over another, it simply comes down to Netflix making a business decision that it makes sense for them to deliver their content directly to Comcast, instead of through a third party. Tied into Netflix’s decision is the fact that Comcast guarantees a certain level of quality to Netflix, via their SLA, which could be much better than Netflix was getting from a transit provider. While I don’t know the price Comcast is charging Netflix, I can guarantee you it’s at the fair market price for transit in the market today and Comcast is not overcharging Netflix like some have implied. Many are quick to want to argue that Netflix should not have to pay Comcast anything, but they are missing the point that Netflix is already paying someone who connects with Comcast. It’s not a new cost to them.

This how the Internet has grown since its inception. Senders and receivers of content have funded access, services, backbone and growth costs across the Internet. Each may pay different costs per Mbps based on volume, competition, location and many other factors. This is where being big and powerful helps negotiate a more favorable deal based on efficiencies you may be able to drive. If you get into picking and choosing that a really big CDN player gets bandwidth free because they are powerful, but a small CDN or content owner has to buy transit, that’s not fair either. That is why companies have settlement-free interconnect policies, which are based on balanced and shared network investment. Commercial deals around interconnect help alleviate the bright lines between settlement-free interconnect (or peering) and a customer buying a retail product. Wholesale commercial deals take into account efficiencies and many other factors to drive a much lower unit cost.

There are no major “peering wars”, as the media likes to portray, disagreements yes, but they are based off of business decisions, like any other contract for services. [See: Netflix’s Streaming Quality Is Based On Business Decisions by Netflix & ISPs, Not Net Neutrality] Many options exist in the market for exchanging traffic and what is taking place between Netflix and ISPs is not new. These types of commercial arrangements between carriers, ISPs, content owners and transit providers happen every day. This time its simply high profile because it involves Netflix and the media picks up on it and implies or assumes things that simply aren’t accurate.

Outside of authors who cover networking for a living, I wonder if any member of the media even knows how to do a traceroute. You’ll notice that this whole Comcast/Netflix story broke early as a networking person who isn’t a member of the media, published what he saw in a traceroute. If you write about content delivery, LEARN HOW TO DO A TRACE ROUTE and see how content is being delivered how you get to the source of where the content is being delivered from. If you are too lazy to learn, then you should really stop writing about the subject. I’m no networking engineer, so even for my piece I made sure to speak to those who design, build and connect networks for a living. Bottom line is this is good for Netflix, Comcast and for consumers and it has absolutely nothing to do with Net Neutrality.

Updated 9:46pm: Someone emailed me to suggest that I picked the title I did simply to fight with other media outlets as a way to push more traffic to my blog and make more money. So let me put it on record right now that no sponsor of my blog is charged based on how many page views I get. They all pay a flat fee per month no matter how many page views I get. I have no financial incentive to try and bump my page views quickly.

Too funny, if this is so basic as you imply, why werent terms disclosed?

danrayburn

I didn’t reference the deal as being basic, but rather the definitions of what services mean. In nearly all industries, the details of deals aren’t released. Why doesn’t Netflix say how much they pay to license content from a specific provider? Or how many people watched a specific show or series? Or how much company A spent to buy company B? The vast majority of all deals, in every industry, aren’t disclosed. Mostly I think for competitive reasons.

Reed

Then how do you come to the assumption that this will be cheaper for nflx. A more biased take would be…..you have no clue…..terms werent disclosed

frett

Of course it will be cheaper for Netflix. He’s not saying that savings will be passed on to the consumer.

http://duddits-fairuse.blogspot.com/ duddits-fairuse

Thanks for a concise explanation of this topic. I find it revealing that most technical “news” reporting is done in activist tone. I usually don’t have much to say about network infrastructure agreements because it is non-news. In other words, end users cannot influence the agreements; it’s just business.

If some folks watched the hops a 2-3GB upload to their file locker makes they will notice some interesting names. TANSTAFL

Jay Rosen

“Some are mad at this deal as they say this will start a trend where content owners will need to pay multiple ISPs to have good video quality, which isn’t true…

“Another statement I have seen people write about is saying that the deal focuses on the ‘two company’s pipes’…”

“Many are quick to want to argue that Netflix should not have to pay Comcast anything, but they are missing the point that Netflix is already paying someone who connects with Comcast…”

Some. Many. People. They. These aren’t references but placeholder terms. This post is all about writers who are wrong, but where are these people? Why not do what writers on the internet are able to do? Quote and link to these imbecilic statements from imbecilic writers with their imbecilic understanding of network infrastructure.

The data is actually very easy to understand. Maybe even you could get it.

John

Oh, you mean the screenshots from an internet speed test? Yeah, that’s not data. Sorry.

http://texrat.net/ texrat

More than one person has demonstrated that going through a proxy resulted in significantly improved Netflix performance. On the *current* pipe. Your choice of course to dismiss such findings out of hand.

John

I’d be willing to bet the Proxy’s route was entirely different and traffic was flowing from a point closer (IX-wise) to Netflix, and back to the client device via a significantly less congested path. But hey, feel free to keep pretending that screenshots and anecdotes about proxies lend any validity to your claim.

And the “pipe” thing…yeesh.

Mike Hammett

It is obvious that you didn’t understand this article, nor how the Internet works.

http://texrat.net/ texrat

You know what they say about assumptions…

Mike Hammett

If you knew how the Internet worked, you wouldn’t be making the points that you are.

http://texrat.net/ texrat

Looking through your own comments, I see you’re apparently here to argue against others who come across as knowing more than YOU do. Meanwhile I’m reading and learning.

Mike Hammett

I learn from plenty of people on a continual basis. I also operate an ISP, so I am fairly well versed in how these things work.

Daniel Eriksson

Lol, that blog post was funny – if anything it proved was that streaming Netflix took half of his available bandwidth…

georgeou

I get his point that Netflix gets to offset some cost from Cogent, but there’s no way Comcast was or is offering cheaper connectivity than Cogent. If Comcast was offering lower cost and higher quality connections before, Netflix never would have bought access from Cogent.

Cogent was selling Comcast network transport below cost because they were exploiting their peering agreement with Comcast and they were paying nothing to sell Comcast network to Netflix. Comcast also wasn’t getting their full connect rate. So if Comcast bought 2000 gigabits/second from Cogent, they couldn’t actually deliver 2000 gigabits most of the day because the peering connection was too full. Any pipe that Comcast sells to Netflix would provide much higher throughput even if the pipe was the same size. Therefore Comcast would be able to sell at a higher price on this fact alone. Comcast would also be able to sell a larger pipe to Netflix.

So if Netflix ends up sending 2 or 3 times more traffic to Comcast with a direct peering connection, Comcast would be able to charge 2 or 3 times more at a minimum. Comcast might give a quantity discount on cost per video delivered, but there’s no way they would charge less than Cogent.

zornwil

“If Comcast was offering lower cost and higher quality connections before, Netflix never would have bought access from Cogent.” – another reason I demand to understand why this author “guarantees” that Netflix is paying less despite admitting he/she does not actually know. That statement alone calls into question the veracity of the entire article.

danrayburn

You are “assuming” I don’t know. There are many pieces of information to this story that I know, but can’t discuss or disclose, which is considered off-the-record.

zornwil

You said you don’t know the price and offered no mitigating information. Thanks for vaguely speaking to that you have insider info, then, or otherwise have done some journalistic work. That said, no offense, but I can’t take your word for it with zero other qualifier as to why or how you might know.

John Willkie

your “information” is just what? Lack of knowledge? funny.

http://hightechforum.org/ Richard Bennett

Nice article, Dan, the only sensible thing I’ve read about the subject so far. Running down the first couple of pages of Google hits, I find most of the so-called journalists simply megaphoned Public Knowledge, declared it the end of the Internet, and called it a day. It’s stories like this that remind us that the vast majority of Internet coverage in the press and in the large tech blogs is a joke.

I also agree that Sam Gustin’s revised post was among the best of the mainstream lot. I would rate Ed Wyatt’s New York Times article as one of the worst. He’s a predictable amplifier for the extreme net roots, which really shouldn’t fly in the nation’s paper of record. GigaOm, Ars Technica, and TechCrunch had the usual chip on the shoulder as they always do. Stacey was especially funny in GigaOm when, in her third Netflix/Comcast post of the day, she declared the deal not in violation of net neutrality (whatever that means this week) but bad, bad, bad nevertheless. The worst of the bunch was the Mac guy in PC World: http://www.pcworld.com/article/2099983/with-netflix-deal-comcast-hangs-kick-me-sign-on-net-neutrality.html . So much melodrama, so little content; he couldn’t even bother reaching out to Public Knowledge.

I’m sad it broke on a Sunday because it means I have to wait another day to see what the New York J-school mafia has to say about it. You can always count on Jeff Jarvis and Clay Shirky to babble some serious nonsense about anything like this.

The bottom line is that Netflix is the Internet’s largest source of content in the countries it serves, but it’s been acting like a garage band by relying on CDNs and transit providers like Level 3 and Cogent to get primo connections to the large ISPs. At some point, Netflix must realize it’s at the grownups table and act accordingly. Perhaps Comcast’s engineers explained how the Internet really works to the Netflix kids.

frett

“The bottom line is that Netflix is the Internet’s largest source of
content in the countries it serves, but it’s been acting like a garage
band by relying on CDNs and transit providers like Level 3 and Cogent to
get primo connections to the large ISPs. At some point, Netflix must
realize it’s at the grownups table and act accordingly. Perhaps
Comcast’s engineers explained how the Internet really works to the
Netflix kids.”

This is actually a good point. It would be even worse if Amazon had not gotten into the streaming business.

http://www.ivpcapital.com/blog Michael Elling

Comcast is oversubscribing the service they sell. It’s like selling someone a $30,000 car which they can only drive to the mailbox and back. What’s worse is that even if they buy a 50mbs service and their 5mbs video stream is pixelating, they are then told their overall monthly consumption should should be capped. A 250GB cap is 2% of possible throughput across an 18 hour day. Time to call the internet access providers (IAPs) out on false advertising claims.

John Willkie

your rant has NOTHING to do with this thread, except that pixelization may have been caused by the IX being oversubscribed, not the last mile.

http://interstream.com/ Cathy Dolbec

I totally agree with Richard. It is nice to see an analyst who actually understands the history as well as how the interconnection ecosystem really works. Unfortunately, I’d add the Tim Lee at the Washington Post to the bottom of the list. There are so many falsehoods presented by the press out there such as “all packets are currently treated equal” on the Internet, that this post is refreshing!

bobby_b

Techcrunch, NPR, the WSJ, Forbes, CNET . . . they all got the story wrong because of their lack of ability to understand tech?

But Time Magazine gets it and so we should be reading and believing what they say?

I have to make the assumption you didn’t really read the update to this post at 10:15pm. The author clearly states that Time removed a fluff piece and put up a well-research piece in it’s place. So yes you should be reading it. Why assume there is some nefarious plot here when the author clearly states why he “removed” Time from the list (actually Time is still in the list, now with a strikethrough) ?

Cruxius

Most tech sites understand ISPs about the same way Stormfront understands race relations.

frett

Lol At first I thought you were talking about the old game company. Had to look up the other Stormfront. Of course I would add NAACP and Al Sharpton to that list, too.

http://wwwhatsup.com Joly MacFie

typo: vary greatly based on the region of the world you are buying transit it.

Julien

HOPUS http://www.hopus.net/ propose a new model, better for end users and finally better for ISP/Content, you should take a look !

Robert Enger

The traffic-balance requirement being espoused by many large last-mile ISPs is morally indefensible.

In the case of Netflix and many other content suppliers, the data that they supply is usually being delivered AllTheWay to the end-market at NO COST to the last-mile operator. The last-mile operator need only accept the data and deliver it to their own direct customers (at the customer’s contracted data rate or substantial fraction thereof). Typically, the last-mile ISP is only being asked to accept data from some place in the city and deliver it to their own customer in the same city. No long-haul ISP cost is being incurred by the last-mile ISP to support this traffic. Yet, the large last-mile ISPs are refusing to deliver. Even though they accept payment from their direct customers, they LITERALLY won’t reliably transport data from one side of the city to another for their own paying customer. What exactly is the customer of the last-mile ISP purchasing for their monthly fee, if the last-mile ISP won’t even deliver data within the same city? Most would agree, “a pig in a poke”.

Traffic-balance rules for settlement-free interconnect (private or public peering) were established in the old days when long-haul providers bore the pain of accepting data at remote locations and delivering it to their own customers (and recursively). Traffic-balance ensured that competing long-haul providers shared the pain (at least approximately).

Times have changed. The traffic flow patterns on the Internet are not the same today, as they were in 1995. For example:
o Today, thanks to intelligent server-selection algorithms, content is often sourced from servers in the SAME CITY as the end-user who requested it. (As discussed above)
o Last-mile networks are for the most part asymmetric in nature (providing much much greater downstream capacity than upstream capacity; due to technical constraints of the physical media and/or MAC protocol). Such asymmetric-technology last-mile networks (eg cable-modem) will not be able to achieve traffic-balance; there will ALWAYS be more data coming into the last-mile infrastructure from CDNs and long-haul ISPs than going back up.

It is disingenuous for the operators of last-mile networks to insist on traffic-balance. It provides a (false) moral foundation upon which they erect a financial framework intended to either a) discourage OTT (and other types of competing service), and/or b) extort money from the content supplier( by making them or their long-haul ISP pay fees to the last-mile operator).

These large last-mile operators are plain-and-simple leveraging their defacto monopoly to extort “protection money” from the content supplier. They are not satisfied with the revenue received from their own direct customers; they are so greedy that they wish to exact tribute fees from content suppliers too.

Industry apologists and PR sock-puppets will argue that last-mile ISPs need extra revenue in order to build-out their last-mile infrastructure to accommodate increased usage. A reasonably straightforward response is to direct ones attention to the business news where two of the major last-mile operators have recently engaged in very costly vertical integration or consolidation business deals. They apparently have a good amount of cash on hand. They elect to ignore upkeep and growth of their land-line last-mile business in favor of bold strategic business deals. There are no competitive market forces acting to protect the consumer, and there is no active government intervention to protect the consumer.

In a properly functioning consumer market place, abusive behavior would not persist. If end-users lived in an area with aggressive competition in the last-mile marketplace, then competitive pressure could force last-mile operators to provide customer-friendly service. Alas,many markets in the US have only a single genuine high-speed last-mile ISP; a few have two providers. Time and time again, consumer surveys report that ISPs are one of the most hated businesses in the US. Doesn’t seem like competition is working.

(It is worth recalling that cellular service sucked big-time until the PCS auctions brought four or more competitors into the market place. Even two competent, viable 800Mhz operators were not enough to engender meaningful competition to the benefit of the consumer!)

The business practices of ISPs today are the same as the old days of two-competitor 800Mhz cellular, where bills were high and coverage sucked. As both cellular and last-mile ISP each appear to be undergoing market consolidation, it seems less and less likely that consumers will have an opportunity to make market competition work for them. If government does not become engaged in some manner (even if only by building empty conduit or FTTH infrastructure that ISPs can rent) then consumers are condemned to be the victims of these immoral business practices in perpetuity.

http://www.ivpcapital.com/blog Michael Elling

Exactly. This is 1913 all over again. Build the moat around the last mile as far into the WAN as possible. National is best, followed by regional, then state, then city, etc… That’s what AT&T did. It agreed to interconnect points if they were at least were beyond 50 miles from their serving center. In this case it’s ONE interconnection point nationwide? Hmmmh!

The real battle here is over LinearTV. If Netflix can reach the end-user with 4K it will be lights out for the traditional providers. But beyond that there is a bigger issue which the author doesn’t discuss; namely tromboning and hairpinning. While I am in the minority I do believe within 5-10 years we will all be communicating via HD video. Forcing the 2-way video sessions to travel farther and get switched or peered through a limited number of interconnect points is not only wasteful from a capacity perspective but also will increase latency and degrade service. But heck, who cares about the future?!?

Further to that latter point and more immediately, isn’t it less wasteful for Netflix’ intelligence to get as close to the edge and be shared, as they have a more complete view of their subscribers’ consumption models and can better statistically multiplex transmission and storage? I don’t know the details, so I can’t comment, but it certainly doesn’t appear to be an efficient deal any which way you slice it. Hopefully the regulators start looking at these peering issues and overall costs to the end user closely.

Todd O’Neill

You have worked very hard to make this site a source for information about online video. You ARE the media. If you don’t agree or like what the OTHER media are publishing then you should respectfully correct them.

You have /had such an incredible opportunity here to elevate the industry by entering the conversation in regard to online video technology and how it fits in the puzzle of internet content in general. The issue of net neutrality is no joke to online video and should not be dismissed. It is why the industry has been able to grow to support a specialty website and conferences focused on online and streaming video. Whether it’s last mile, mid mile, or first mile, between an open internet and industry consolidation, online video, and it’s consumers, WILL be affected. I haven’t caught your reporting on that yet.

This a techno rant that has no place on a source for professional information.

frett

How has he not corrected them?

jefferymoore83

I believe the point Todd’s making is that the tone is dismissive of all the major coverage. Many people notice that ‘the media’ often gets tech stories wrong, but I agree that net neutrality shouldn’t be so easily brushed aside and it may be an issue that even the author doesn’t understand as thoroughly as he seems to think he does.

John Willkie

you are guessing.

Ray Lopez

Seems it is too much of a coincidence that this tieup happened on the heels of a FCC Fed Ct ruling on net neutrality that gave a green light to local loop bundling. Contrary to the author, I think indeed the lawyers for both companies were driving this deal, since it’s harder to “undo” a deal if it is done, if later the net neutrality decision is struck down. It will be grandfathered in by law, or at least be given a reasonable chance to unwind without financial harm to both parties. Anyway, for the record I’m for bundling of the local loop, as I don’t think it harms the consumer and probably helps them.

John Willkie

the green light was always there, since the FCC ruling was prima facie wrong (second time around for them.) But, you failed to notice that COMCAST by buying NBC, was forced to observe the FCC’s net neut proscriptions through 2017. How many times can somebody be wrong in just a few paragraphs? You may have set a record.

Ray Lopez

ah John, there are lawyers and there are lawyers. The good ones learn how to bend the rules. The bad ones–I hope you are not one of them–think only about the letter of the law. I would bet this deal was done by the lawyers, reading the consent degree, which, as you say, only extends until 2017, not that far away by business standards. Get in on the ground floor sort of thing. Surrebuttal time, Mr. serial poster?

John Willkie

Ray, I’m not an attorney, but I always want governments to operate within the letter of the law. Anything else is called t-y-r-a-n-n-y. And, you are ignorantly “doubling down” since Comcast’s compliance requirement was apparently unknown to you. If you could provide two cases where Comcast (whom I don’t use and which is not a customer of mine) has even been accused of discriminatory behavior since the NBC purchase? (I” even ‘give’ you the Tennis Channel case, even though all courts up to the Supreme Court this past Monday have ruled the behavior to not be discriminatory nor a violation of the agreement).
Network neutrality — whatever that means this month — doesn’t mean you can charge for transit; it means if you charge, you have to charge everyone equally.
Also, you have a comprehension issue on the margins. The consent agreement runs through 2017; saying it only extends until 2017 implies it runs a year shorter. Here’s another clue: to get this deal approved, Comcast will have to extend that agreement even further. Word.

danrayburn

“Network neutrality — whatever that means this month — doesn’t mean you can charge for transit; it means if you charge, you have to charge everyone equally.”

What? Everyone has to charge the same price for transit, by law? I don’t even know how to respond to that as it’s so far from reality.

John Willkie

Dan, perhaps your problem trying to respond is that you somehow missed that when two different people pay the same price for something, they are being treated equally? What exact part of my comments do you deem to be unreal?
You’ve also engaged in reductio ad absurdum. Network neutrality cannot be defined in a way that is enforceable by law. There are no network neutrality laws — but there was an FCC regulation. You’re too smart to be confused by both law and equality. I said nothing about network neutrality being enforced by law and that is contrary to my position.

Kami3k

Good corporate drone.

noname

This argument that Netflix is already paying a CDN so now they will just pay Comcast is all well and good. Except. I already pay my ISP to provide ME with a connection at a theoretically fixed speed and monthly bandwidth tier. If I decide to watch a Netflix movie, that request is made and the movie plays it is because I make it using the connection I already pay for. I could (and often do) just as easily use that connection to do something else. Like browse websites. Online games. Email. Whatever.

So how is fair that the connection I am paying for incurs a sort of tariff if what I want to do is one type of use but not another? Are the bits different? No. They are just bits. Are there perhaps more of them for a movie? Oh sure, but I already pay for several hundred gigabytes of usage a month, which I never come close to using. So my ISP is actually making a little extra money selling me capacity it never actually has to fulfill.

It’s too bad they feel like Netflix owes them more money, but nothing Netflix does is initiated by Netflix. It’s all requests from customers who are already paying their ISPs. And if what we pay doesn’t cover connecting to Netflix, then what DOES it cover and what exactly are they selling to customers which they call an “internet connection” anyway?

Mitch Aubitz

As dirty as it sounds, this is one of the things that has been going on since the Internet’s inception. You pay for the Settlement-free/basic internet access part of the peering from your ISP (small things like gaming, VOIP, email, general browsing, etc.).

When a distributor of large volumes of data (Netflix) puts strain on the requested ISP’s network, its gains attention from all the congestion it would cause. This is why Paid-Peering exists as a way to firmly agree between two companies that this much data is going over to the other’s network.

Video data is a luxury to pass without hiccups as it is basically sending a 4 gb game every time you watch a 720p movie. Games don’t need to be redownloaded to play over and over again. Video unfortunately does when hosted in the “cloud” (to prevent copyright).

Blame the people who binge-watch House of Cards on Netflix that encourages ISP’s like Comcast to incorporate data caps on their networks (to leverage congestion). This is the “technical” side of it all that people seem to bypass when reading these articles (not saying you did, just generalizing).

I use Netflix as well as subscribe to Comcast and I have not reached the limit. Mediation is word I think needs to be revisited in family households as the term “go outside and play” has all but vanished. Yes, our country’s ISP’s are stupid for not putting the large government tech grants to building out larger networks. But, what is done is done and you have to make do with what you have as an ISP and a data distributor.

FrankM

Monthly datacaps will always be unfair. There is no correlation between congestion and months. Congestion has to do with HOURS, and a “prime-time data cap” would be fair.

Netflix should be working on a spec for next-generation devices that incorporates encrypted, local storage. With cached programming, no more “buffering….”. When 4k streams are more widespread, it will be more efficient to download a 4k stream at 2am and then watch it at 8pm.

http://www.ivpcapital.com/blog Michael Elling

Internet
access providers (they should be called IAPs, not ISPs since they don’t provide a service, as you say they provide a connection) in the last mile are selling you a $30,000 car to drive back and forth to your mailbox. It is blatant false advertising
and illegal taking of subscribers’ money.

This article misses several important points, while resorting to the same wordsmithing that gave us the farcical notion of net-neutrality to begin with.

danrayburn

“This article misses several important points”, which are?

No wordsmithing, I used actaul definitions to define the words I used.

http://www.ivpcapital.com/blog Michael Elling

As far as the end user is concerned they don’t distinguish between speed and throughput. Heck they don’t even realize the difference between upload and download otherwise there would have been a huge outcry long ago. So distinguishing between speed and throughput is nonsense.

Fact is if you pay for 50mbs and stream 5mbs that jitters you are getting ripped off. Furthermore, if there is a 250GB cap (a stock, not flow figure) then you are using 2% of approximate capacity over an 18 hour day each month. Another rip-off.

Time to call the internet access providers (IAPs) out on false claims and advertising; and perhaps illegal takings. Where’s the FTC? Who needs the FCC?

As I said elsewhere, the major point is where the interconnect or peering point is. Not how much they paid, which clearly you and pretty much everyone else, don’t know. The fact is the access monopolies are pushing their monopoly up the stack and into the core with these arrangements. That’s what you are missing. They’ve been doing it for 100 years.

http://www.ivpcapital.com/blog Michael Elling

Additionally, as you point out in your subsequent thread with transit costs, the last mile pricing should reflect marginal cost the same way the competitive WAN (transport/transit in layer 2 and peering in layer 3) does. Instead of using jargon, using the right demarc points and layers so that everyone gets exactly what is happening and where the monopoly/duopoly bottlenecks are.

Even if Netflix is in a position to cut a sweetheart deal with Comcast and other major IAPs the competitive CDNs lose out and therefore the rest of the internet loses out on the scale economies. That’s what makes the internet the internet; not a bunch of last mile monopolies directly peered with content providers which is what you are promulgating and supporting by saying the deal is justified.

Mike Hammett

More NetFlix customers complained to NetFlix than Comcast customers complained to Comcast.

sam1331

Mr. Rayburn seems to have a very good grasp of how the internet currently works and how others misunderstand it. What he seems to lack is any sort of understanding of how the current state of affairs is terrible for consumers. He writes that the Netflix/Comcast deal is a “business decision.” Comcast and Verizon have a huge financial incentive to hamper OTT development because of their own video products. If they just make business decisions, without the necessary competition or government oversight, they are going to do what they can to degrade competitors products. That’s just a fact. Companies act out of self interest.

What other people on the internet realize is that allowing Comcast and Verizon to control Netflix’s access to their consumers, even if just by manipulating who ISPs peer with and how well they keep up the connections, is going to result in a far poorer and less competitive internet.

Mike Hammett

Your comment proves that you didn’t understand what he wrote. Well, that or you have some pretty crazy ideas about how things should happen… that shouldn’t happen.

John Willkie

You failed to notice the wind shift: cable companies receive more revenue and gain more profits from internet access than they do from TV services, and have for more than a few years.

Dennis McDonald

One fact that might be added to this discussion is that Comcast is not just an intermediary connection, it also creates and sells content in direct competition with Netflix. Because of this it may be incorrect to suggest that Netflix is just replacing paying one interconection service with paying for another.

Mike Hammett

You are correct on the former, but making an awfully big leap on the latter.

John Willkie

No, he’s not even correct on the former, since NBC Universal also licenses content to Netflix, but Netflix doesn’t show content (aside from paid advertising) on NBC.

http://sisyph.us/ ErikSchwartz

Finally someone writes something sensible about the topic.

Generic User

“While I don’t know the price Comcast is charging Netflix, I can guarantee you it’s at the fair market price for transit in the market today and Comcast is not overcharging Netflix like some have implied.”

How can you guarantee the price is fair when you don’t know what the price is?

John Willkie

Do you understand economics even a little bit? When there is traffic congestion, do you wait in traffic, or find a way around bottlenecks? What is cheaper, waiting in traffic or getting to your destination?

hondo209

all I know is that I have three internet providers that I use…one in my office, one at a vacation home and one at my residence…..by far the worst of the three is Comcast….I just hope to god that they don’t become the next telecommunications monopoly…or we will all have fewer choices for much more money….

Mike Hammett

Please quantify how they are the worst. Comcast is a competitor of mine and do you know what? They do a pretty darn good job!

John Willkie

Nor does one point create data. We have no idea why he thinks Comcast is worse. Sometimes, these problems are easily fixed with a truck roll.

Dorian Cole

No doubt you are correct about all you said in this article. Thanks for the information. Regardless, the public needs to stay on top of this or commercial interests will take them right down the road to very high costs and very limited choices. Commercial interests always try to lock out their competitors to guarantee and increase their profit. Always – that’s just business. The other stories, while only partially correct, raise public awareness and concern.

Rich

Good for you Dan!
Like the Kennedy assassination, 911, or Area 51, those with no knowledge of the subject prefer a conspiracy theory.

Dax McClain

What I question is this: Did Comcast deliberately throttle the traffic from Netflix in order to extort money?

The absence of Net Neutrality would allow them to do this.

Nothing I’ve read disputes that companies pay for bandwidth appropriate to the service they provide (streaming video to millions of people requires a lot more bandwidth than say… this blog). If this story is mearly Comcast getting paid for providing the appropriate amount of bandwidth necessary then there’s no story.

However, if Comcast intentionally bottlenecked the bandwidth to get paid more then we have a problem.

The problem is, now we can’t really prove it and even if we could now it’s apparently legal…

zornwil

Yes, this article is accurate and “fair” in a precise way, but it is entirely non-credible and unfair in how it implies that the author somehow knows the peering conditions, knows that Netflix somehow used a higher-cost provider, and, overall, uses the facts that the specifics of this are not related to net neutrality to avoid the specific and important issue you discuss re throttling and the positioning and fairness of the actual “pipe” providers.

Mike Hammett

I agree on the bit about price. Unless he was at that table, he doesn’t know the price. The rest is either specific to the announcement and already public or generic information that everyone that runs a network already knows.

zornwil

Sorry, didn’t mean to actually imply the otherwise-informational bits were incorrect; I meant that such an egregious error or misstatement renders an author non-credible as a rule, which is of course most unfortunate when the author is actually otherwise factually correct.

kicker

Comcast was the first last mile provider to aggressively start to manage their peering arrangements for profit. About a half a decade ago they started systematically de-peering and refusing to upgrade existing peering arrangements. Essentially they have created artificial bandwidth scarcity in a world that is overflowing with capacity and prices that have fallen off the cliff.

The big networks have been playing games for five years to try to ‘route-around-the-damage’. An example of some of the games are documented here:

Comcast’s response has been to essentially degrade service to *all* networks that don’t pay-to-play. I know of one global mega-network who had a standing offer to meet Comcast at any place/any capacity to route around massive bottlenecks to no avail.

Essentially this is a game of Chicken among the major ISPs to see who will crack first. Since Comcast’s customer base is relatively unsophisticated home users who have little choice and those connecting to them are generally sophisticated companies like NFLX, Google, Amazon, etc the advantage is Comcast’s. Comcast’s customer don’t know things stink and instead of complaining (because really? Call Comcast and say “The Internet is Slow?”) they just go some where else.

John Willkie

every ISP has managed their network for profit or has gone out of business. Don’t be foolish. You or I may not like Comcast, but that’s beside the point.

Mike Hammett

Comcast did no such thing. They simply did not increase their connectivity with Cogent, resulting in all Cogent-derived content to be affected.

Dax McClain

So basically it’s a more clever way of throttling the connection to Netflix, since Cogent is Netflix’s ISP?

So, why was this problem reported in fall of 2013? The net neut decision was in place then. Also, you fail to recognize that Comcast has agreed to follow the net neut conditions through 2017, and nothing a court has done affects that. Ignorance is quite blissful, I am told.

jefferymoore83

“Updated 9:46pm: Someone emailed me to suggest that I
picked the title I did simply to fight with other media outlets as a way
to push more traffic to my blog and make more money. So let me put it
on record right now that no sponsor of my blog is charged based on how
many page views I get. They all pay a flat fee per month no matter how
many page views I get. I have no financial incentive to try and bump my
page views quickly.”

Apparently, you have a very unusual relationship with your ad providers that goes against everything I’ve known about how internet advertisements work. As someone whose paycheck exists because of the type of model you’re claiming not to use, it seems a little hard to believe.

danrayburn

Most blogs have to charge based on a CPM model as they are big outlets, with lots of writers, development people and a big overhead.

I’m one person, who pays $100 a year to host my blog. I can and do have a much simplier and easier way to charge sponsors. I’m not trying to “milk them” for every dollar I can, simply by increasing my page count.

as an internet marketer who buys media – it’s not unusual at all to bill by days instead of CPM. Those who buy audiences sometimes don’t care about page views. This is a very targeted blog that appeals to a certain, perhaps high-value audience

zornwil

“While I don’t know the price Comcast is charging Netflix, I can guarantee you it’s at the fair market price for transit in the market today and Comcast is not overcharging Netflix like some have implied.” – how can you guarantee this???? I don’t actually have a specific reason to doubt it, but at the same time you “guarantee” it, you are absolutely certain and willing to recompense me for your mistake. Please explain…

http://www.MaxCDN.com/ Chris Ueland / MaxCDN

Good read. Thanks for the coverage, Dan.

Angel

One of the main reasons we subscribe to Netflix is to eliminate the need to deal with Comcast (we’ve had terrible, awful, horrendous experience with Comcast as subscribers to its cable and internet services). The association Netflix is creating to leverage Comcast diminishes it in my mind. After I’m done watching House of Cards, season 2, perhaps I’ll discontinue service

Except he gets the history wrong. Paid peering and the “Tier 1 club” offered network operators “double-sided” business models in those days.

greg g

“Commercial interconnect relationships, also referred to as paid peering agreements, have been around since the Internet started, and it’s how the Internet works.”

Well, I guess that depends on your definition on when the Internet started. Most people agree that the Internet started as the ARPANET in the 60s and there were no commercial entities connected to it until the 90s, so there were certainly no paid commercial peering agreements before the 90s.

Also, I worked for a regional ISP around 1997-1998 and we had peering agreements will all of the major ISPs at the main US peering points at the time and none of them were paid peering agreements. You simply put in equipment at the peering location (e.g. MAE-west, MAE-East, etc.) and set up peering with the other ISPs that requested it. We had several private interconnects with some of the ISPs as well and neither of us charged each other. The ISP ended up selling itself in 1998 to a larger, global ISP because it was clear that the days of our free peering agreements were coming to an end soon. So even in the late 90s, paid peering agreements were not entirely “how the Internet worked”, although it was quickly becoming that way.

So I guess I just take umbrage with your claims as to the exact timeframe of paid peering agreements.

http://hightechforum.org/ Richard Bennett

AOL offered paid peering in the 90s, greg.

greg g

Sure, I didn’t say paid peering didn’t exist in the 90s. Surely it did. However, to say that paid peering is the way the Internet has worked since its beginning is not correct.

To even say that it is the way the Internet worked since the beginning of the commercialization of the Internet in the early 90s, the author is still overstating his case since the initial ISPs building the commercial backbone in the early to mid 90s generally freely exchanged their traffic at public peering points.

I realize that I am splitting hairs a bit here, but I think that it is fair to criticize an article specifically written about getting technical details wrong.

http://hightechforum.org/ Richard Bennett

The “also known as” part of the statement is incorrect, I’ll agree with you on that. But the larger point about the fact that “commercial interconnect relationships…have been around since the Internet started, and it’s how
the Internet works” is correct, provided we’re talking about the commercial Internet and not the NSFNet. But even NSF required payment.

danrayburn

If you go back to the 60’s, I agree my statement would be too broad. The time frame I am thinking of is when CDNs first came to the market, around 1996. By the 98-99 time period, there were many paid peering agreements involving folks like AOL and Yahoo! amongst others.

Mike Hammett

As long as peering has existed there has been someone willing to take money for it.

As long as transit has existed, there has been someone willing to deliver less for it.

Elliot Gardner

Netflix runs their infrastructure in AWS, using Amazons load balancing software, would you consider that their own CDN?

Adriaan Bloem

No, Open Connect is Netflix’ own CDN, where they put their own caching nodes with ISPs. Load balancing on AWS is something completely different.

Dan, you are missing the longer term issue of fewer connection points. What does that mean for capacity efficiency and the forms of statistical multiplexing and supply/demand tradeoffs that occur at every layer and boundary point of the competitive infostack?

The reality is that access providers have always tried to push the demarc as far into the WAN and away from the edge as possible. That’s what Kingsbury was all about in 1913. 50 mile exclusion zone. And that’s what expanded flat-rate calling areas were in the 1980s by the Bells; which unwittingly gave rise to the commercial internet! It’s all about building bigger moats and Comcast has just built a beauty!

My concern is less about impact to the 1-way video model and more the 2-way HD collaborative model that should hopefully develop quickly. It is important to relate this action to the discussion at the FCC over new regulatory and interconnect structures under its IP Transitions, NN and USF/CAF rulemakings. Simply put, it would be a mistake to go to fewer interconnection points nationwide. It’s absurd to trombone or hairpin a 2-way HD video session hundreds of miles when the participants are a few miles apart. But that’s what will happen in an IP model controlled by the internet access providers.

Michael

Mike Hammett

I think you just said a lot of fancy words to make yourself look smarter.

This wouldn’t have been an issue for 2 way video as video would have been returning the other direction, balancing the ratio. The route it takes would be no different than route any other data takes now.

I don’t think anyone said there are fewer connection points, mainly because that information wouldn’t be public.

http://www.ivpcapital.com/blog Michael Elling

Comcast has stated 29, Verizon 12, & AT&T just 4 peering points for 1 & 2-way IP traffic nationwide.
In plain english they want to push their access monopolies into the core and away from the edge. As well they want to limit scale & competitive pricing power of transit providers & CANs.

John Willkie

Another crazy Kingsbury idiot! Or, is this the same one?

Sean Rees

There is a difficulty here where Comcast is both the last mile and the transit provider. It’s technically correct that Comcast (the transit provider) and Netflix shared unequal amounts of data in raw numbers — but Comcast (the last mile provider) is paid by real humans for that connectivity. For those customers, Netflix and services like it are a main reason they acquire, retain, and upgrade their accounts. If Comcast weren’t so dominant in the market, holding the last mile of a not insignificant number of Netflix customers hostage as it were, both Comcast and Netflix would have likely found a fee-free arrangement beneficial rather than consuming both of their transit capacity.

Rick

Finally someone who understands! Thank you so much for this article. I have been in complete disbelief at just how widespread all the misinformation about this deal is.

Antistuff

Author makes lots of good points here, but just like he misses the point in his borderline-trolling send off (no financial incentive from more readers to this blog) he misses quite a bit of nuance and unintended effects of this deal.

Similarly, while author may not be rewarded financially for a hot topic blog like this, he is receiving other incentives – readership, exposure, etc.

dAVE

And your name Antistuff doesn’t imply that you are a troller as well – or maybe making money by working at a job where you receive incentives? Add to the discussion and keep on point -

Antistuff

My handle has nothing to do with my content. As you say, add to the discussion and keep on point. Good advice, that.

Steven Simons

Why is it cheaper to buy directly from Comcast? If Comcast is guaranteeing better quality and the flow is directly to Comcast, wouldn’t that warrant a premium?

xmiro

for one because a CDN like Akamai has to have profit built-in the pricing – they manage the servers, contracts etc

RustyS

“Netflix is not a network operator, they don’t have any “pipes”, they buy
capacity from other network providers who have the pipes. So while this
deal is about the interconnection between Comcast and Netflix, Comcast
is the only one who actually owns the pipes. Netflix is simply leasing
capacity from other network providers.”

I find this part of the article very misleading. Comcast is not a Tier-1 network, neither is Netflix, but to state Netflix” is not a network operator” seems rather misleading.

Last I checked, you would need to operate your own network to have an ASN and peer at numerous IXPs globally. Not to mention the “servers” Netflix deploys at facilities would require transport for content-fill.

While other good points have been made in this article, I feel this crucial fact alone discredits a large portion of it. It’s a rather important factor in making an argument for either side.

danrayburn

Netflix is not a network operator. A network operator is defined as “An organization that provides carrier services (network services) in the
wired or wireless arena. Telephone companies and ISPs are examples.”

That’s not Netflix. They are not an operator. That statement is not “misleading”, it’s simply a fact.

RustyS

They operate a network, don’t they? How else do they peer? How do they control their outbound traffic among the numerous carriers they have connectivity established? How are they distributing content to their cache servers deployed all around the world?

Many ISPs lease capacity from other networks. Does that not make them a network operator?

Does Comcast truly own all of the physical fiber they transmit data over (e.g. from POP to POP)?

Definition of “Network Operator” aside, if it walks like a duck, talks like a duck…

Dave

What’s your point?? So they are a network operator so what?

swattz101

It does have me curious. As far as I know, Netflix does own their Open Connect CDN. By definition, CDN is Content Delivery Network, ergo they own a network. The difference is Open Connect is only for Netflix traffic. According to Netflix, Open Connect is a single purpose CDN.As far as I know, Netflix does not allow other traffic over their CDN. They do not provide carrier services for other businesses.

Rusty It’ll probably be more accurate to state that ‘Netflix is not a Transit provider’. They sure operate they network of contents/caches. They fill they caches through Transit they buy from a Transit provider. How they reach end users ?

Peering Agreement (At IXP or not)

juepucta

it’s still payola

mtnrunner2

Many simply like to bang their pitchforks on the ground when they see corporations doing something that makes them money. And “net neutrality” is just a way for neo-Marxists to justify taking over the Internet by force.

Kami3k

How does it feel to be a dumb ass?

Dave

This is all about two tails wagging one dog – Netflix is a provider (incredibly large) and Comcast is a last mile provider (also very large) – the interconnects are being bypassed in this deal and that is what scares me just a little – the companies that carried this data are being bypassed and this will create less competition.

no matter what agreement is in place between Netflix and the internet provider, comsumers should be able to have 4k or 3D streaming from netflix as long as they have a connection with sufficient bandwith. It does not seem to be the case anymore. Consumers should unite and presure companies to stop those practices, mark my words : THIS IS ONLY THE BEGINING

heuristocrat

Dan thanks again for making your insightful, entertaining and well written work available to us! This was a a great post to help separate the “signal from the noise” on this topic.

Officer Serpico

Dan, I’m very pro net neutrality but this article was very good and presented a practical, technical side to the issue and the deal that I hadn’t considered. Thank you.

That said, I have a question: if it makes sense for Netflix to deliver direct to Comcast instead of 3rd party companies, why is Netflix only doing this now? This hasn’t always been a good idea? What has happened and/or changed in the marketplace or the streaming business that would spur this agreement? For someone like me, the timing of this deal around the Verizon/FCC lawsuit and the circuit court ruling taints things a bit.

John Willkie

they didn’t have the scale before, and they started to outgrow their network providers’ relationships/points of connection with ISPs some time back.

Heath Roberts

Speed and throughput are not the same, but they are related, at least if you’re using TCP: you can’t get high throughput without high speed (low RTT or latency). That’s the whole reason that getting a CDN node (a caching server) near the end user is important.

You make the argument that Netflix is only changing who they pay, but I think the real reason for this deal is to get Comcast to stop screwing with (artificially delaying) traffic from Netflix. That’s why the deal is important: it sets a new precedent.

Comcast is a monopoly carrier who doesn’t want to be regulated as one, and they’re essentially extorting Netflix into paying so the two companies’ mutual customers get decent service (Comcast is also playing both sides of the fence by operating both transit and last-mile networks).

Netflix’ business decision in this case is that paying is easier than fighting.

Scott Jacobs

I am confused – there are competitors to Comcast. If you did a search I bet you could find three or four options in your city in under 20 minutes.

And Comcast and other similar providers have spend a LOT of money making their infrastructure what it is – are they not entitled to charge money for its use?

Netflix was already paying, and they should pay. Amazon has to pay UPS to deliver a package, and this is roughly the same thing.

http://www.thegraphicmac.com/ JimD

The important question is: “Who the hell is reading TechCrunch and expecting, well-thought-out and researched opinion, or even a respectable 10-15% content accuracy? The only writers they had that did that have been gone for at least a year or more.

JV

I respectfully disagree. Every ISP will hold every OTT operator hostage – because they hold the keys to the last mile – the keys to the very castle itself. This is NOT a technical issue. It is a new revenue stream for anyone providing a home entry point to the home.

Verizon is already in talks with Netflix and you can bet that ATT and the lesser ISPs will demand their cut of the bounty.

This just a new cost of doing OTT business.

Keep Pushing Forward

Gregory

The ISP’s are not charities. Just because someone requires enormous amounts of bandwith does not mean the ISP’s should continually upgrade their networks for free. “Net Neutrality” has become the code words for give me more bandwith but I don’t want to pay for it. I don’t download movies and I don’t want to subsidize those that do. Let the providers or the end-users pay for what they use.

Kami3k

No doubt you one of those retards that blame piracy for companies going out of business.

Gregory

And you must be one of those retards who don’t know anything about business.

Kami3k

So you are one of those retards that fall for their bullshit lines.

It can’t be that their product just sucks, nah. Ignore all the companies that deal with those things, in none draconian ways, and yet still are very successful.

It’s you who knows nothing of business, or anything it seems. Especially the internet, how it works and other countries’ networks.

swattz101

It all depends on the traffic. Netflix is sending a lot of traffic that saturated the peering points and make peering extremely one sided. The smaller ISPs don’t have the same clout, and the same customer base, so there won’t be as much traffic.

Other streaming companies are not using as much bandwidth and are not over saturating the peering points, so the current peering agreements still work. In fact, with less Netflix traffic passing over them, traffic should get better.

John Willkie

Are ISPs monopolies? NO. So, if they hold up a content provider — as opposed to enabling them, as here — customers will move on to another ISP. Or, at least the non-foolish ones will move.

Brady

In many areas, ISPs ARE a monopoly. For example, at my apartment in the Washington, D.C. metro area, the only internet connections available to my building are Comcast Docsis 3.0 Coaxial Cable (fast and cheap… let’s not talk about customer service), spotty LTE from AT&T, Verizon, or T-Mobile (I live in the middle of a thick 15-story building, so I don’t get a lot of reception except on my balcony), or dial-up (not a real option).

Comcast has a monopoly on roughly 645 households in my apartment building alone. Same was true at my last apartment complex also in the DC-area. Same for my folks who live in rural Texas and can only get AT&T DSL or satellite broadband (again, slow and expensive – not a real option).

Maybe at your house there’s not a monopoly. But a few million Americans do live under a last-mile monopoly.

Just to give a very different anecdote against monopolies, when I threatened to cancel with Comcast due to poor customer service and messing up my equipment order, the guy actually asked me, “Who are you going to sign up with, then? We’re the only high speed internet at your address.” And he was right. I couldn’t threaten to cancel to get any better treatment. I had to fix my own equipment order by driving to a Comcast Service Center.

John Willkie

Absurd comment, and internally inconsistent. You can use T-Mobile, Verizion (landline), Verizon (wireless), T-Mobile, AT&T (wireless, maybe even wired). If your landlord has decided that only the Telco and Comcast have physical access to your building, you can even use satellite. Landlords are a monopoly on their property.
I’m also a bit confused about the “15-story building” parry. Washington DC has a well-established 125-foot limit on buildings. If you are in a 15 story building within the district, there is only 100 inches (8 f, 4 in) between floors. Allowing for 6 inches between a ceiling and the floor above (the norm is >8 inches due to a/c vents, etc) you must have very low ceilings in your building, or you count the basement level(s) as floor(s).

Brady

If you calm down and think about this, it’s not so absurd.

First of all, as I said, I could access the internet through mobile, but the fact remains I don’t get great service. Probably more important, though, is that, as I understand it, except for T-Mobile, all wireless data plans will have some sort of cap or throttling structure. No matter what, it’s also not anywhere near the same price point or bitrate as cable internet, so if my needs are a fast and cheap connection, Comcast is basically my only option there.

You are incorrect in stating that I can connect to Verizon landline, but you were correct that, after all, there is a connection to AT&T DSL. But, it hasn’t been upgraded with new technologies – the best offer they could make me was 1.0 Mbps for $50 per month. In the context of talking streaming video, that’s not a real option. Let’s not even consider dial-up, for the same reason.

Next, you might notice I said DC-area. If you must know, my apartment is located in Silver Spring, Maryland, where (apparently) 15 story buildings are allowed. I’m on the 8th floor, my window and balcony face north, and furthermore, because my building is U-shaped, I face more of my own building. Yeah, I got stiffed on the view, but rent’s affordable. At any rate, a satellite dish wouldn’t work for me. Even if it did, satellite internet is also expensive and slow. When I lived in a more rural location, I lived with it for a year, and let me tell you, waiting for your packets to complete their terrestrial transit, get sent up to the satellite and back down to your dish adds up fast. The *minimum* ping for satellite internet is 250 ms, and that’s when conditions are perfect and traffic is light. Although it doesn’t really matter for applications such as Netflix, it makes more real-time uses like multiplayer gaming or Skype impossible.

I know it’s easy to be short and contentious when I’m disagreeing with your point, but you’ve gotta trust me that I looked into all my options, and there weren’t any real ones except for Comcast. And I know I’m not the only one in this situation.

Scott Jacobs

Comcast isn’t the One that made the monopoly, your landlord did. You should be mad that he screwed you, not Comcast.

Paul_MD

I’m paying my last mile provider (quite a bit of money, particularly compared to the rest of the world) not just for the last mile connection to my home, but for the other end of that to be connected to other networks. In a competitive world last mile providers would be competing on delivering quality service, the only reason they can charge for peering is because they don’t have a competitor that I can switch to that would seek out more peer connections and Open Connect servers from NetFlix.

John Willkie

How many competing providers are there in your area?

Paul_MD

There is only one provider available to me that provides service faster than 1.5Mbps. I live in NYC, which as one of the more densely populated areas on earth should have more than one option.

JohnWillkie

You have to be kidding, ignorant, just lying or perhaps you meant to qualify that by instead saying “one wired (not wireless provider) without a data cap, with flat rate-pricing, and at a cost and under conditions that I prefer with bit rates in excess of 1.5 Mbps.” Otherwise provide your zip code and I’ll research your options. Verizion fios is in NYC, no?
As just one case in point, in mere suburban San Diego, I have the choice of two wireling providers (Cox Cable and AT&T), each with basic data rates in excess of 10 Mb/sec.

Paul_MD

Nice of you to accuse me of lying and all that, but no, none of those. Technically FiOS is “available” in NYC, but Verizon will only install it in a building if all the tenants switch to Verizon contracts, even though the fiber runs right in front of my building. In theory I could go to wireless, but that’s only going to get me about 4GB/mo data cap (or something in that range that will let me watch a single episode of something in NetFlix SuperHD before hitting me with comical overages). In a few places RCN is available, but it varies street-by-street, and isn’t available on my street (I don’t live off the beaten path or anything). I could also get a commercial connection for about $3,000/mo., (I actually investigated this) but that seems a little unreasonable and takes months of navigating bureaucracy and contractors.

There aren’t any other providers (“wireling” or otherwise) available that would let me watch NetFlix for less than the cost of my rent. Is that a suitable qualifier for you?

JohnWillkie

so, you’re complaining about price, not availability. My point.

Ilya Wolf

Why don’t they have a competitor? What exactly stops new players from entering the market, if the business is so highly profitable (as you imply)?

Paul_MD

Regulatory capture & collusion. Municipalities will only grant line permits to one service provider (ostensibly so we don’t have a mess of cables on telephone poles). Service providers collude tp re-enforce this situation, and agree not to enter each others’ markets.

OMFG, it’s obvious from many of the posts that a little bit of network knowledge is dangerous. Netflix likely SAVED money in the deal. Once the traffic is directly connected to the final destined network, they use less 3rd party transit, and pay less for less protected service.. And this notion that Comcast customers are held “hostage” is childish. In almost every city that Comcast operates there is an ISP choice, be it wireless, wireline, or something else. If you don’t like the local cable company, talk to the CITY you live in which issues the permits to operate as a provider. The cost to overbuild an existing cable company is MASSIVE. Google Fiber is only successful where they can talk the city into a completely different set of rules they made the cable and phone company play by, and they limit to just the easy neighborhoods.

SMH

Joe6Pack

Oh, and Thank You Dan for trying to talk sense into the masses. Your title is spot on, most of the talking heads are full of air. Very similar to the gun debates.. Content free zones…..

btcomp

Only thing that is startling is that 1/3 of Internet use at night is Netflix!!!!

swattz101

Yes it is startling. I didn’t realize the usage was that low.

btcomp

Do you know what percentage this is of total capacity?

boys5

Thanks for the informative article. Being an original SeaChange guy I was frustrated enough by the decline in my Netflix service in December to go through rigorous debugging to figure out why Netflix from my Panasonic TV on Verizon FIOS was hardly ever HD anymore. A few days later, digging thru user groups and using my own house as a lab, I figured out the same basic problem you described (CDN to the subscribers ISP problem). But after several calls into Netflix, they were not willing to accept the responsibility.

Hearing about the Comcast deal, and now your article I see for sure was right. At first I was hoping moving the Comcast traffic off Cogent might speed up the FIOS traffic (if the CDN servers were the congestion point). But as you and this deal clarify it is the Cogent-Comcast peering point that is the problem, so it seems reasonable to believe it is also the Cogent-Verizon peering point causing my problem. Do you have any insight if the Verizon peering point will move from Cogent to Comcast, and then we’ll see if the Comcast-Verizon peering point can handle the FIOS Netflix traffic, or do you think Netflix will keep using Cogent for Verizon? In which case, I guess I’ll have to wait for that peering point to get upgraded, or Netflix to move this workload over to Verizon as another one of their CDN ISPs (or watch HD movies at 7am, when it works fine!

Nadene Sanders

I LOVE NETFLIX AND A BETTING PERSON WOULD BUY ITS STOCK- IT USED TO COST $30.00 WHEN I BOUGHT IT. PLUS GET YOUR FREE MEMBERSHP AND REAL MEMBERSHIP BEFORE THE RATES GO UP AND YOUR PRICE WILL NOT CHANGE.

Al Stevens

Hello Mr Rayburn, I read your article and you have the facts very well covered. I am just not sure why you are so critical of others reporting? You said “Outside of authors who cover networking for a living, I wonder if any member of the media even knows how to do a traceroute”……. Why would they want to or need to? I have worked as a technician for a major Communications company for 20 years and the majority of my customers (90%+) don’t even know what speed they are paying for, they just know it’s working or not because it seems slow…..Most people don’t know how a cell phone works but we all have them. I understand getting the story correct but how about being a little less condescending. I am not saying this to start a fight I am just saying the tone of your article makes me want to avoid reading your work.

danrayburn

The reason I am critical is because the media has a responsibility to get the facts right and seperate facts from opinions. When they don’t, they mis-inform readers which creates confusion.

ehsan keykha

i really enjoyed to visit this site.site and i book mark ur site.This is a nice content with lots of
information. It’s a very excellent idea for raising money for charity. I think
honest review is more important for authors. I like your whole discussion. Keep
it up.Keep blogging.ur site is good.and finelly ur
site going to in high position
This is a really good read for me. Must agree
that you are one of the coolest blogger I ever saw.
Thank you for this very interesting infographic
! I’m talking about Google Venice on my blog.تور چین

Thank you for this blog. That’s all i can say..useful information shared… i am very happy to read this article.Film streaming . thanks for giving us nice info. fantastic walk-through. i appreciate this post

I wish I understood all of this… I think I get part of it but an Illustration would certainly help. All I know is that my comcast net has gotten considerablly less relaible in the past couple of months with LOTS of packet loss. Just to see if I got this right though: My cpu…….Box…….Server….. box….end point server. Each box/ Server may be owned/maintained by a different company and each “…” (line) may also be owned/maintained by a different company?!

Rahul gill

Hey would you mind letting me know which webhost you’re utilizing?

I’ve loaded your blog in 3 completely different web browsers and I must say

this blog loads a lot faster then most. Can you suggest a good internet hosting provider at a honest price? Thank you,I appreciate it!

Daily posts by Dan Rayburn about the online video industry, business trends & analysis, market data & research as well as the online video business models in the media & entertainment, broadcast, advertising & enterprise industries.